Question

Glacier Products Inc. is a wholesaler of rock climbing gear. The company began operations on January 1, Year 1. The following transactions relate to securities acquired by Glacier Products Inc., which has a fiscal year ending on December 31:

Year 1
Jan. 18.	Purchased 5,800 shares of Malmo Inc. as an available-for-sale investment at $42 per share, including the brokerage commission.
July 22.	A cash dividend of $0.60 per share was received on the Malmo stock.
Oct. 5.	Sold 2,600 shares of Malmo Inc. stock at $45 per share less a brokerage commission of $55.
Dec. 18.	Received a regular cash dividend of $0.60 per share on Malmo Inc. stock.
Dec. 31	Malmo Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $40 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment.
Year 2
Jan. 25.	Purchased an influential interest in Helsi Co. for $740,000 by purchasing 70,000 shares directly from the estate of the founder of Helsi. There are 200,000 shares of Helsi Co. stock outstanding.
July 16.	Received a cash dividend of $0.70 per share on Malmo Inc. stock.
Dec. 16.	Received a cash dividend of $0.70 per share plus an extra dividend of $0.15 per share on Malmo Inc. stock.
Dec. 31	Received $22,000 of cash dividends on Helsi Co. stock. Helsi Co. reported net income of $90,000 in Year 2. Glacier Products Inc. uses the equity method of accounting for its investment in Helsi Co.
Dec. 31	Malmo Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $45 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment for the increase in fair value from $40 to $45 per share.

1. Journalize the entries to record the preceding transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. In your computations, round per share amounts to two decimal places.

Date	Description	Debit	Credit
Year 1
Jan. 18.
July 22.
Oct. 5.
Dec. 18.
Dec. 31
Year 2
Jan. 25.
July 16.
Dec. 16.
Dec. 31-Dividends
Dec. 31-Income
Dec. 31-Valuation

2. Prepare the investment-related asset and stockholders’ equity balance sheet presentation for Glacier Products Inc. on December 31, Year 2, assuming that the Retained Earnings balance on December 31, Year 2, is $540,000.

Glacier Products, Inc. Balance Sheet (selected items) December 31, Year 2
Current Assets:
Investments:
Stockholders' Equity:

Answer 1

date account title debit credit Year 1 Jan 18. available for sale investment-Malmo Inc 243,600 243,600 cash 5800 42 Jul 22. cash 3,480 Dividend revenue 3,480 5800*0.6 Oct 5. cash (2600 45-55 116,945 7,745 Loss on sale of investment available for sale investment-Malmo Inc. (2600 42 109,200 Dec 18. cash 5800-2600-3200 shares remaining 1,920 1,920 Dividend revenue 3200*0.6 Dec 31. Unrealised Gain/(Loss) on available for sale investments 6,400 val uation allowance for available for sale investments 6,400 (42-40)*3200 Year 2 Jan 25. Investment in Helsi co. Stodk 740,000 740,000 cash Jul 16. cash 2,240 Dividend revenue 2,240 3200*0.7 2,720 Dec 16. cash Dividend revenue 2,720 (0.7+0.15) 3200 Dec 31. cash 22,000 Investment in Helsi co.Stock 22,000 Dec 31. Investment in Helsi co.Stock 31,500 Income of Helsi co. 31,500 90000*70000/200000) Dec 31. val uation allowance for available for sale investments 16,000 Unrealised Gain/(Loss) on avail able for sale investments 3200* (45-40) 16,000

Glacier Products, Inc. Balance Sheet(selected items) December 31, Year 2 current asset Available for sale investment at cost add : valuation allowance for avail able for sale investments (16000-6400) 9,600 144,000 available for sale investment at fair value investment Investment in Helsi co. Stock (740000-22000+31500) 749,500 stockholder equity retained earning unrealised gain (loss) on available for sale investments (16000-6400) 540,000